PROFILE

OFFICIAL NAME:
Swiss Confederation

Geography
Area: 41,285 sq. km. (15,941 sq. mi.); about the size of Vermont and New Hampshire combined.
Cities: Capital--Bern (population about 123,000). Other cities--Zurich (341,000), Geneva (176,000), Basel (165,000), Lausanne (116,000).
Terrain: 60% mountains, the remainder hills and plateau. Switzerland straddles the central ranges of the Alps.
Climate: Temperate, varying with altitude and season.

People
Nationality: Noun and adjective--Swiss (singular and plural).
Population (2002): 7.3 million.
Annual growth rate: 0.8%.
Ethnic groups: Mixed European.
Religions: Roman Catholic 42%, Protestant 33%, Muslim 4.3%, others 5.4%, no religion 11%.
Languages: German 63.7%, French 20.4%, Italian 6.5%, Romansch 0.5%, other 9.4%.
Education: Years compulsory--9. Attendance--100%. Literacy--100%.
Health: Infant mortality rate--4.8/1,000. Life expectancy--men 76.5 yrs., women 82.5 yrs.
Work force (3.96 million): Agriculture and forestry--4.2%. Industry and business--25.6%. Services and government--70.2%.

Government
Type: Federal state.
Independence: The first Swiss Confederation was founded in August 1291 as a defensive alliance among three cantons. The Swiss Confederation established independence from the Holy Roman Empire in 1499.
Constitution: 1848; extensively amended in 1874; fully revised in 2000
Branches: Executive--Federal Council, collegium of seven members, headed by a rotating one-year presidency. Legislative--Federal Assembly (bicameral: Council of States, 46 members; National Council, 200 members). Judicial--Federal Tribunal.
Administrative subdivisions: 26 cantons (states) with considerable autonomy.
Political parties: Swiss People's Party (SVP), Social Democratic Party (SP), Free Democratic Party (FDP), Christian Democratic Party (CVP), and several smaller parties representing localities or views from extreme left to extreme right.
Suffrage: In federal matters, universal over 18.

Economy
GDP (2004): $358 billion (444 billion Swiss francs).
Annual growth rate (2004): 1.7% in real terms.
Per capita income (2001): $22,898 (38,470 Swiss francs).
Avg. inflation rate (2005): 1.1%.
Natural resources: Waterpower, timber, salt.
Agriculture (2.26% of GDP in 1999): Products--dairy, livestock, grains, fruit and vegetables, potatoes, wine.
Arable land (1999): 26%.
Industry (29.9% of GDP in 1999): Types--machinery, chemicals, pharmaceuticals, time pieces, precision instruments, textiles and clothing, pigment, transportation equipment.
Services (67.8% of GDP in 1999).
Trade (2002): Exports--$113.7 billion (141 billion Swiss francs): machinery and electronics; chemicals and pharmaceuticals; instruments and timepieces. Major markets--Germany, United States, France, Italy, U.K., Japan. Imports--$106.4 billion (132 billion Swiss francs): machinery and electronics; chemicals; vehicles. Major suppliers--Germany, Italy, France, Netherlands, U.S., U.K., Japan.

PEOPLE
Switzerland sits at the crossroads of several major European cultures, which have heavily influenced the country's languages and cultural practices. Switzerland has four official languages--German, French, Italian, and Romansch (based on Latin and spoken by a small minority in the Canton Graubunden). The German spoken is predominantly a Swiss dialect, but newspapers and some broadcasts use High German. Many Swiss speak more than one language. English is widely known, especially among professionals.

More than 75% of the population lives in the central plain, which stretches between the Alps and the Jura Mountains and from Geneva in the southwest to the Rhine River and Lake Constance in the northeast. Resident foreigners and temporary foreign workers make up about 20% of the population.

Almost all Swiss are literate. Switzerland's 13 institutes of higher learning enrolled 99,600 students in the academic year of 2001-02. About 25% of the adult population holds a diploma of higher learning.

The Constitution guarantees freedom of worship, and the different religious communities co-exist peacefully.

Switzerland consistently ranks high on quality of life indices, including highest per capita income, one of the highest concentrations of computer and Internet usage per capita, highest insurance coverage per individual, and high health care rates. For these and many other reasons, it serves as an excellent test market for businesses hoping to introduce new products into Europe.

HISTORY
Originally inhabited by the Helvetians, or Helvetic Celts, the territory comprising modern Switzerland came under Roman rule during the Gallic wars in the 1st century BC and remained a Roman province until the 4th century AD. Under Roman influence, the population reached a high level of civilization and enjoyed a flourishing commerce. Important cities, such as Geneva, Basel, and Zurich, were linked by military roads that also served as trade arteries between Rome and the northern tribes.

After the decline of the Roman Empire, Switzerland was invaded by Germanic tribes from the north and west. Some tribes, such as the Alemanni in central and northeastern Switzerland, and the Burgundians, who ruled western Switzerland, settled there. In 800, the country became part of Charlemagne's empire. It later passed under the dominion of the Holy Roman emperors in the form of small ecclesiastic and temporal holdings subject to imperial sovereignty.

With the opening of a new important north-south trade route across the Alps in the early 13th century, the Empire's rulers began to attach more importance to the remote Swiss mountain valleys, which were granted some degree of autonomy under direct imperial rule. Fearful of the popular disturbances flaring up following the death of the Holy Roman Emperor in 1291, the ruling families from Uri, Schwyz, and Unterwalden signed a charter to keep public peace and pledging mutual support in upholding autonomous administrative and judicial rule. The anniversary of the charter's signature (August 1, 1291) today is celebrated as Switzerland's National Day.

Between 1315 and 1388 the Swiss Confederates inflicted three crushing defeats on the Habsburgs, whose aspiration to regional dominion clashed with Swiss self-determination. During that period, five other localities (cantons in modern-day parlance) joined the original three in the Swiss Confederation. Buoyed by their feats, the Swiss Confederates continuously expanded their borders by military means and gained formal independence from the Holy Roman Empire in 1499. Routed by the French and Venetians near Milan in 1515, they renounced expansionist policies. By then the Swiss Confederation had become a union of 13 localities with a regularly convening diet administering the subject territories. Swiss mercenaries continued for centuries to serve in other armies; the Swiss Guard of the Pope is a vestige of this tradition.

The Reformation led to a division between the Protestant followers of Zwingli and Calvin in the German and French parts of the country respectively, and the Catholics. Despite two centuries of civil strife, the common interest in the joint subject territories kept the Swiss Confederation from falling apart. The traffic in mercenaries as well as the alienation between the predominantly Protestant Swiss and their Catholic neighbors kept the Swiss Confederation out of the wars of the European powers, which formally recognized Swiss neutrality in the Treaty of Westphalia in 1648. The Swiss remained neutral during the War of the First Coalition against revolutionary France, but Napoleon, nonetheless, invaded and annexed much of the country in 1797-98, replacing the loose confederation with a centrally governed unitary state.

The Congress of Vienna in 1815 re-established the old confederation of sovereign states and enshrined Switzerland's status of permanent armed neutrality in international law. In 1848, after a brief civil war between Protestant liberals seeking a centralized national state and Catholic conservatives clinging on to the old order, the majority of Swiss Cantons opted for a Federal State, modeled in part on the U.S. Constitution. The Swiss Constitution established a range of civic liberties and made far-reaching provisions to maintain cantonal autonomy to placate the vanquished Catholic minority. The Swiss amended their Constitution extensively in 1874, establishing federal responsibility for defense, trade, and legal matters, as well as introducing direct democracy by popular referendum. To this day, cantonal autonomy and referendum democracy remain trademarks of the Swiss polity.

Switzerland industrialized rapidly during the 19th century and by 1850 had become the second most industrialized country in Europe after Great Britain. During World War I serious tension developed between the German, French, and Italian-speaking parts of the country, and Switzerland came close to violating its neutrality but managed to stay out of hostilities. Labor unrest culminating in a general strike in 1918 marked the interwar period, but in 1937 employers and the largest trade union concluded a formal agreement to settle disputes peacefully, which governs workplace relations to the present day. During World War II, Switzerland came under heavy pressure from the fascist powers, which after the fall of France in 1940 completely surrounded the country. Some political and economic leaders displayed a mood of appeasement, but a combination of tactical accommodation and demonstrative readiness to defend the country helped Switzerland survive unscathed.

The Cold War enhanced the role of neutral Switzerland and offered the country a way out of its diplomatic isolation after World War II. Economically, Switzerland integrated itself into the American-led Western postwar order, but it remained reluctant to enter supranational bodies. Switzerland did not join the United Nations, even though Geneva became host to the UN's European headquarters, and the country played an active role in many of the UN's specialized agencies. Switzerland also remained aloof in the face of European integration efforts, waiting until 1963 to join the Council of Europe. It still remains outside the European Union. Instead, Switzerland in 1960 helped form the European Free Trade Area, which did not strive for political union. Following the Cold War, Switzerland joined the Bretton Woods institutions in 1992 and finally became a member of the United Nations in 2002.

GOVERNMENT
Switzerland is a federal state composed of 26 cantons (20 are "full" cantons and six "half" cantons for purposes of representation in the federal legislature) that retain attributes of sovereignty, such as fiscal autonomy and the right to manage internal cantonal affairs. Under the 2000 Constitution, cantons hold all powers not specifically delegated to the federation. Switzerland's federal institutions are:

• A bicameral legislature--the Federal Assembly;
• A collegial executive of seven members--the Federal Council; and
• A judiciary consisting of a single, regular court in Lausanne--the Federal Tribunal--and special military and administrative courts. The Federal Insurance Tribunal is an independent division of the Federal Tribunal that handles social security questions; its seat is in Lucerne.

The Constitution provides for separation of the three branches of government.

The Federal Assembly is the primary seat of power, although in practice the executive branch has been increasing its power at the expense of the legislative branch. The Federal Assembly has two houses--the Council of States and the National Council. These two houses have equal powers in all respects, including the right to introduce legislation. Legislation cannot be vetoed by the executive nor reviewed for constitutionality by the judiciary, but all laws (except the budget) can be reviewed by popular referendum before taking effect. The 46 members of the Council of States (two from each canton and one from each half canton) are directly elected in each canton by majority voting. The 200 members of the National Council are directly elected in each canton under a system of proportional representation. Members of both houses serve for 4 years.

The Federal Assembly meets quarterly for 3-week plenary sessions. The parliamentary committees of the two houses, which are often key in shaping legislation, meet behind closed doors, but both majority and minority positions are presented during the plenary sessions. The Federal Assembly is a militia parliament, and members commonly retain their traditional professions. Individual members of parliament have no personal staff.

The Assembly can be legally dissolved only after the adoption of a popular initiative calling for a complete revision of the Constitution. All citizens 18 or older have the right to vote and run for office in national, cantonal, and communal elections unless individually disqualified by the relevant legislature.

A strong emphasis on ballot votes arises out of the traditional Swiss belief that the will of the people is the final national authority. Every constitutional amendment adopted by parliament is automatically brought to the ballot and has to carry a double majority of votes and states in order to become effective. The voters themselves may actively seek changes to the Constitution by means of the popular initiative: 100,000 voters may with their signatures request a national vote on a proposed constitutional amendment. New federal legislation also is subject to popular review, under the so-called referendum: 50,000 signatures suffice to call a ballot vote on any federal law adopted by parliament. The Assembly can declare an act to be too urgent to allow time for popular consideration, but this is rare. At any rate, an act passed urgently must have a time limit and is later subject to the same constitutional provisions on popular review as other legislation.

The top executive body is the seven-member cabinet called the Federal Council. The Federal Assembly individually elects the seven Federal Councilors in a joint session of both houses at the opening of a new legislature. Federal Councilors are elected for 4-year terms; there are no term limits and no provision to recall the cabinet or individual members during the legislature. Each year, the Federal Assembly elects from among the seven Federal Councilors a president and vice president, following the principle of seniority. The member who is vice president one year traditionally is elected president the next. Although the Constitution provides that the Federal Assembly chooses and supervises the cabinet, the latter has gradually assumed a preeminent role in directing the legislative process as well as executing federal laws.

Under an arrangement between the four major parties called the "magic formula" which was introduced in 1959 but ended in December 2003, two Federal Councilors (ministers) were elected each from the Christian Democrats, the Social Democrats, and the Free Democrats and one from the Swiss People's Party. Under the new magic formula starting January 1, 2004, the new party composition of the cabinet changed to the following composition: 1 Christian Democrat, 2 Social Democrats, 2 Free Democrats, and 2 representatives of the Swiss People's Party.

The Constitution requires that Federal Councilors act collectively in all matters, not as individual ministers or as representatives of their parties. Each Councilor heads one of seven federal departments and is responsible for preparing legislation pertaining to matters under its jurisdiction. The president, who remains responsible for the department he heads, has limited prerogatives and is first among equals (there is no formal prime minister).

The administration of justice is primarily a cantonal function. The only regular federal court, the Federal Tribunal, is limited in its jurisdiction. Its principal function is to hear appeals of civil and criminal cases. It has authority to review cantonal court decisions involving federal law and certain administrative rulings of federal departments, but it has no power to review legislation for constitutionality. The Tribunal's 30 full-time and 30 part-time judges are elected by the Federal Assembly for 6-year terms.

The cantons regulate local government. The basic unit of local government, which administers a village, town, or city, is the commune or municipality. Citizenship is derived from membership in a commune and can be conferred on non-Swiss by a commune. Cantons are subordinate to federal authority but keep autonomy in implementing federal law.

Principal Government Officials

Federal Council (Swiss Cabinet)
Home Affairs--Pascal Couchepin (Free Democrat)
Justice and Police--Christoph Blocher (Swiss People's Party)
Foreign Affairs--Micheline Calmy-Rey (Social Democrat)
Defense--Samuel Schmid - President for 2005 - (Swiss People's Party)
Finance--Hans-Rudolf Merz (Free Democrat)
Economic Affairs--Joseph Deiss (Christian Democrat)
Environment, Transport, Energy, Communications--Moritz Leuenberger - Vice-President - (Social Democrat)
Federal Chancellor--Annemarie Huber-Hotz (Free Democrat)
Ambassador to the United States--Christian Blickenstorfer

Switzerland maintains an embassy in the United States at 2900 Cathedral Avenue NW, Washington, DC 20008. Consulates General are in Atlanta, Chicago, Houston, Los Angeles, New York, and San Francisco. Swiss national tourist offices are in Chicago, New York, and San Francisco.

POLITICAL CONDITIONS
Although it has a diverse society, Switzerland has a stable government. Most voters support the government in the armed neutrality underlying its foreign and defense policies. Domestic policy poses no major problems, but the changing international environment has generated a significant reexamination of Swiss policy in key areas such as defense, neutrality, and immigration. Quadrennial national elections typically produce only marginal changes in party representation.

In recent years, Switzerland has seen a gradual shift in the party landscape. The rightist Swiss People's Party (SVP), traditionally the junior partner in the four-party coalition government, more than doubled its voting share from 11% in 1987 to 22.5% in 1999, and finally to 26.6% in 2003, thus overtaking its three coalition partners. This shift in voting shares ended the 44-year old "magic formula," the power-broking agreement of the four coalition parties, and gave a second seat in the 7-person Swiss cabinet to the Swiss People's Party at the expense of the Christian Democrats, now the weakest party with 14.4% of the votes. For the first time in Swiss history, the SVP has two seats in the government, reflecting its new status as Switzerland's most popular party.

On December 10, 2003, Christoph Blocher -- a self-made industrialist and main figure of the right-populist Swiss People's Party known for his strong opinions on asylum and migration and law and order issues -- was elected to the cabinet by parliament, replacing the incumbent Christian Democrat Justice and Police Minister Ruth Metzler. The parliament also elected the Free Democrat Hans-Rudolf Merz to replace retiring Finance Minister Kaspar Villiger. All other incumbent ministers were reelected. Both Blocher and Merz are strong advocates of drastic public spending cuts in order to reduce the country's mounting $102 billion francs state deficit and are staunch opponents to Switzerland's entering the European Union. The current makeup of the government also portends a conservative fiscal policy, even less movement toward integration in Europe, and a strong defense of Switzerland's banking secrecy.

The Constitution limits federal influence in the formulation of domestic policy and emphasizes the roles of private enterprise and cantonal government. However, the Confederation has been compelled to enlarge its policymaking powers in recent years to cope with national problems such as education, agriculture, energy, environment, organized crime, and narcotics.

ECONOMY
Despite a dearth of natural resources, the Swiss economy is among the world's most advanced and prosperous. Per capita income is virtually the highest in the world, as are wages. Trade has been the key to prosperity in Switzerland. The country is dependent upon export markets to generate income while dependent upon imports for raw materials and to expand the range of goods and services available in the country. Switzerland has liberal trade and investment policies and a conservative fiscal policy. The Swiss legal system is highly developed, commercial law is well defined, and solid laws and policies protect investments. The Swiss franc is one of the world's soundest currencies, and the country is known for its high standard of banking and financial services. Switzerland is a member of a number of international economic organizations, including the UN, the World Trade Organization, the International Monetary Fund, the World Bank, and the Organization for Economic Cooperation and Development (OECD).

Being so closely linked to the economies of western Europe and the United States, Switzerland has not been able to escape recent slowdowns experienced in these countries. During most of the 1990s, the Swiss economy was western Europe's weakest, with annual GDP growth averaging 0% between 1991 and 1997. Beginning in late 1997, the economy steadily gained momentum until peaking in 2000 with 3% growth in real terms. But in 2001 the rate of growth dropped to 0.9%, and in 2002 and 2003 the economy virtually stagnated with real GDP up by only 0.1%. The Swiss Economic Ministry had said that both the lack of an upturn in the global economy -- particularly in the Euro zone -- and the still rather firm Swiss franc would continue to hold back the Swiss economy in 2003. Economic performance in 2004 was better than expected thanks to eastern and Asian export markets, and GDP increased by 1.7%. 2005 economic forecasts bet on a 0.9 to 1.6% GDP growth, but structural problems remain the same. The lack of internal economic reforms and a moribund Eurozone economy will once again prevent Switzerland from achieving the much needed 3% growth target.

In 2005, the dollar/Swiss franc exchange rate continued to be shaped by geopolitical tensions. The dollar depreciated further against the Swiss franc from SF 1.49 in October 2002 to SF 1.31 in 2003, and 1.28 in June 2005. The strengthening of the Euro, however, helped Switzerland to minimize the pressure from a weakening dollar. The Swiss National Bank lowered its interest rates to near zero in March 2002 to make the Swiss franc unattractive to foreign investors, and make borrowings cheaper.

The number of bankruptcies in Switzerland during 2004 reached an alarming rate unseen since 1996, numbering 10,500 companies -- 7.4 % more than in 2003. Bankruptcies have been on the rise for the past four years, but the 2004 increase was especially steep. Most cantons recorded an increase in bankruptcies -- Zurich, Basel, Neuchâtel, Geneva and Vaud were hardest hit, while life was better for businesses in Lucerne and St Gallen. Creditors were left facing losses worth $3.87 billion, up almost a third. Given the sluggish economic outlook in Europe, the Swiss Statistics Office believes the upward trend in bankruptcies, both in franc and absolute terms, is likely to continue.

The recent economic slowdown has had a noticeable impact on the labor market. Unemployment increased from 2.6% in 2002 to 4.1% in December 2003, but has since dropped to 3.7%. Among the hardest hit are job seekers between 15-25 with a rate of 4.5%, and hotel and restaurant industry workers with 10.4%. The average number of days devoted to finding a new job increased from 155 to 178 days. One-fourth of the country's full-time workers are unionized. In general, labor/management relations are good, mostly characterized by a willingness on both sides to settle disputes by negotiations rather than by labor action. About 600 collective bargaining agreements exist today in Switzerland and are regularly renewed without major problems. However, the mood is changing. The massive layoffs that resulted from both the global economic slowdown and major management scandals have strained the traditional Swiss "labor peace." Swiss trade unions encouraged strikes against several companies, including the national airline SWISS, Coca-Cola, and Orange (the French telecom operator), but total days lost to strikes remain among the lowest in the OECD. Uncertainties concerning under-funded pension funds, and the prospect of a potential hike in the retirement age have stirred further street protests.

Switzerland's machinery, metals, electronics, and chemicals sectors are world-renowned for precision and quality. Together they account for well over half of Swiss export revenues. In agriculture, Switzerland is about 60% self-sufficient. Only 7.5% of the remaining imports originated from the U.S. Swiss farmers are one of the most highly protected and subsidized producer group in the world. OECD estimates show that Switzerland is subsidizing more than 70% of its agriculture, compared to 35% in the EU. According to the "2007 Agricultural Program" recently adopted by the Swiss Parliament, subsidies will increase by SF 63 million, thus totaling SF 14.092 billion from 2004 to 2007. Mill quotas, however, will be abolished starting in 2009.

Tourism, banking, engineering, and insurance are significant sectors of the economy and heavily influence the country's economic policies. Swiss trading companies have unique marketing expertise in many parts of the world, including eastern Europe, the Far East, Africa, and the Middle East. Not only does Switzerland have a highly developed tourism infrastructure (making it a good market for tourism-related equipment and services), the Swiss also are intrepid travelers. Per capita, more Swiss visit the United States every year than from any other country. Tourism is the most important U.S. export to Switzerland (earning almost $1.5 billion). In 2004, more than 285,000 Swiss came to the United States as tourists.

The Swiss economy earns roughly half of its corporate earnings from the export industry, and 62% of Swiss exports are destined for the EU market. The EU is Switzerland's largest trading partner, and economic and trade barriers between them are minimal. In the wake of the Swiss voters' rejection of the European Economic Area Agreement in 1992, the Swiss Government set its sights on negotiating bilateral sectoral agreements with the EU. After more than 4 years of negotiations, an agreement covering seven sectors (research, public procurement, technical barriers to trade, agriculture, civil aviation, land transport, and the free movement of persons) was achieved at the end of 1998. Parliament officially endorsed the so-called "Bilaterals I" in 1999, and the Swiss people approved them in a referendum in May 2000. The agreements, which had to be ratified by the European Parliament as well as legislatures in all 15 EU member states, entered into force on June 1, 2002. Switzerland has so far attempted to mitigate possible adverse effects of nonmembership by conforming many of its regulations, standards, and practices to EU directives and norms. Full access to the Swiss market for the original 15 EU member states entered into force in June 2004, ending as a result the “national preference”. However, the Swiss will hold a referendum on September 25, 2005 to extend the provisions of Bilaterals I to the new eastern EU member states. A failure to do so is likely to be considered by the EU commission as discrimination against the new EU member states. Using the so-called “guillotine clause” linking all seven agreements together, the EU could revoke the whole Bilateral I package altogether, thus inflicting severe damage on the Swiss economy.

The Swiss Government embarked in July 2001 on a second round of bilateral negotiations with the EU known as “Bilaterals II”. Talks focused on customs fraud, environment, statistics, trade in processed agricultural goods, media, the taxation of savings and police/judicial cooperation (dubbed the Schengen-Dublin accords). Amid a fierce political debate over the essence of Swiss-EU relations and populist warnings against EU workers and criminals entering Switzerland, the Schengen-Dublin package was approved on June 5, 2005 by a narrow referendum of 54.6%. Fears of cheap labor coming from new EU member states have prompted the government to provide for tripartite surveillance committees to ensure that decent wages are enforced. Experts believe the September 25, 2005 referendum will be either narrowly accepted, or worse defeated, leaving Switzerland open to unilateral EU economic retaliation.

As part of the bilateral agreement on the taxation of savings signed in June 2003, Swiss banks will levy a withholding tax on EU citizens' savings income. The tax, starting on July 1, 2005, will increase gradually to 35% by 2011, with 75% of the funds being transferred to the EU.

The Swiss federal government remains deeply divided over EU membership as its long-term goal, and in a March 2001 referendum more than 70% of the voters rejected rapid steps toward EU membership. The issue of EU membership is, therefore, likely to be shelved for several years, if not a decade. In May 2005, the government said it could sign a framework agreement with the European Union, as an alternative to joining the organization, to encourage dialogue and create a platform for closer cooperation. But in parallel, the cabinet reaffirmed its wish to strengthen ties with other non-EU trading partners in Asia and America. Exploratory talks are currently underway to assess the benefits of a U.S.-Swiss Free Trade Agreement, which would be the first ever signed between the United States and a European country.

Switzerland ranks 18th among the main trading partners of the U.S. worldwide. The United States is the second-largest importer (11.5%) of Swiss goods after Germany (20%). The U.S. exports more to Switzerland each year than to all the countries of the former Soviet Union and Eastern Europe combined, and Switzerland imports more U.S. products and services than does Spain. In addition, the United States is the largest foreign investor in Switzerland, and conversely, the primary destination of Swiss foreign investment. It is estimated that 200,000 American jobs depend on Swiss foreign investments. Total U.S.-Swiss bilateral trade increased from $15.33 billion during 2003 to $16 billion in 2004.

DEFENSE
On May 18, 2003, Swiss voters approved the military reform project "Army XXI" that will drastically reduce the size of the Swiss Army. Starting in January 2004, the current 524,000-strong militia will be pared down to 220,000 conscripts, including 80,000 reservists. The defense budget of currently SF 4.3 billion ($3.1 billion) will be trimmed by SF 300 million, and some 2,000 jobs are expected to be shed between 2004 and 2011. The mandatory time of service will be curtailed from 300 to 260 days. All able-bodied Swiss males aged 20 to 30 must serve. Thereafter, most personnel are assigned to civil protection duties until the age of 37.

A new category of soldiers called "single-term conscripts" will discharge the total time of service of about 300 days of active duty in one go. Recruiting is on a voluntary basis and should not exceed 20% of a year's draft. The armed forces have a small nucleus of about 3,600 professional staff, half of whom are either instructors or staff officers, with the remainder mostly being fortification guards. The army has virtually no full-time active combat units but is capable of full mobilization within 72 hours. Women may volunteer to serve in the armed forces and may now join all units, including combat troops. About 2,000 women already serve in the army but, so far, have not been allowed to use weapons for purposes other than self-defense.

The armed forces are organized in four army corps and an air force and are equipped with modern, sophisticated, and well-maintained gear. In 1993, the Swiss Government ordered 34 FA-18s from the United States.

FOREIGN RELATIONS
On September 10, 2002, Switzerland became a full member of the United Nations. Switzerland had previously been involved as party to the Statute of the International Court of Justice and member of most UN specialized agencies as well as the International Atomic Energy Agency. Switzerland has long participated in many UN activities, including the Economic Commission for Europe, UN Environment Program, the UN High Commissioner for Refugees, UN Educational, Scientific and Cultural Organization, UN Conference for Trade and Development, UN Industrial Development Organization, and the Universal Postal Union (UPU). Prior to its formal accession, Switzerland had maintained a permanent observer mission at UN Headquarters since 1948.

Switzerland also is a member of the following international organizations: World Trade Organization, Organization for Economic Cooperation and Development, European Free Trade Association, Bank for International Settlements, Council of Europe, and Organization for Security and Cooperation in Europe (OSCE). In 1992 Swiss voters approved membership in the Bretton Woods organizations but later that year rejected the European Economic Area agreement, which the government viewed as a first step toward EU membership.

The Swiss Constitution declares the preservation of Switzerland's independence and welfare as the supreme objective of Swiss foreign policy. Below this overarching goal, the Constitution sets five specific foreign policy objectives: further the peaceful coexistence of nations; promote respect for human rights, democracy, and the rule of the law; promote Swiss economic interests abroad, alleviate need and poverty in the world; and the preservation of natural resources.

Traditionally, Switzerland has avoided alliances that might entail military, political, or direct economic action, but in recent years the Swiss have broadened the scope of activities in which they feel able to participate without compromising their neutrality. Swiss voters first rejected UN membership by a 3-to-1 margin in 1986 but in March 2002 adopted it, albeit in a very close election, making Switzerland the first country to join the UN based on a popular referendum decision. In similar fashion, the electorate rejected a government proposition to deploy Swiss troops as UN peacekeepers (Blue Helmets) in 1994, but Switzerland joined NATO's Partnership for Peace and the Euro-Atlantic Partnership Council in 1996 and 1997, respectively, and deployed Yellow Berets to support the OSCE in Bosnia. In June 2001, Swiss voters approved new legislation providing for the deployment of armed Swiss troops for international peacekeeping missions under UN or OSCE auspices as well as closer international cooperation in military training.

Switzerland maintains diplomatic relations with almost all countries and historically has served as a neutral intermediary and host to major international treaty conferences. The country has no major dispute in its bilateral relations. Since 1980, Switzerland has represented U.S. interests in Iran. Switzerland played a key role in brokering a truce agreement between the Sudanese Government and Sudan's Peoples Liberation Army (SPLA) for the Nuba Mountain region, signed after a week's negotiations taking place near Lucerne in January 2002.

The Swiss feel a moral obligation to undertake social, economic, and humanitarian activities that contribute to world peace and prosperity. This is manifested by Swiss bilateral and multilateral diplomatic activity, assistance to developing countries, and support for the extension of international law, particularly humanitarian law. Switzerland (mainly Geneva) is home to many international governmental and nongovernmental organizations, including the International Committee of the Red Cross (whose flag is essentially the Swiss flag with colors reversed, the Red Cross historically being a Swiss organization). One of the first international organizations, the Universal Postal Union, is located in Bern.

The Swiss Government on June 25, 2003, eased most of the sanctions against the Republic of Iraq in accord with UN Security Council Resolution (UNSCR) 1483. The government lifted the trade embargo, flight restrictions, and financial sanctions in place since August 1990. The weapons embargo and the asset freeze, the scope of which was extended, remain in force, and restrictions on the trade in Iraqi cultural goods were newly imposed. Though not a member at the time, Switzerland had joined UN sanctions against Iraq after the invasion of Kuwait. To date, Switzerland has joined UN and EU economic sanctions imposed on Sierra Leone, UNITA (Angola), Liberia, Serbia and Montenegro, Burma, Zimbabwe, Sudan, Democratic Republic of the Congo, and Cote d'Ivoire. On October 15, 2003, the Federal Council ended the import restrictions on raw diamonds from Sierra Leone and lifted sanctions against Libya.

Switzerland in October 2000 implemented an ordinance to enforce UN sanctions against the Taliban (UNSCR 1267), which it subsequently amended in April 2001 in accord with tighter UN regulations (UNSCR 1333). On May 2, 2002, the Swiss Government eased the sanctions regime in accord with UNSCR 1388 and 1390, lifting the ban on the sale of acetic acid (used in drug production), Afghani Airlines, and Afghani diplomatic representations. The weapons embargo, travel restrictions, and financial sanctions remain in force. The Swiss Government in November 2001 issued an ordinance declaring illegal the terrorist organization al Qaeda as well as possible successor or supporting organizations. More than 200 individuals or companies linked to international terrorism have been blacklisted to have their assets frozen. Thus far, Swiss authorities have blocked about 72 accounts totaling $22.6 million.

Switzerland has furnished military observers and medical teams to several UN operations. Switzerland is an active participant in the OSCE, its foreign minister serving as Chairman-in-Office for 1996. Switzerland also is an active participant in the major nonproliferation and export control regimes.

Under a series of treaties concluded after World War I, Switzerland assumed responsibility for the diplomatic and consular representation of Liechtenstein, the protection of its borders, and the regulation of its customs.

U.S.-SWISS RELATIONS
Switzerland is a democratic country subscribing to most of the ideals with which the United States is identified. The country is politically stable with a fundamentally strong economy. It occupies an important strategic position within Europe and possesses a strong military capability. It has played an increasingly important role in supporting the spread of democratic institutions and values worldwide, as well as providing humanitarian relief and economic development assistance. U.S. policy toward Switzerland takes these factors into account and endeavors to cooperate with Switzerland to the extent consistent with Swiss neutrality.

The first 4 years of cooperation under the U.S.-Swiss Joint Economic Commission invigorated bilateral ties by recording achievements in a number of areas, including consultations on anti-money laundering efforts, counter-terrorism, and pharmaceutical regulatory cooperation; an e-government conference; and the re-establishment of the Fulbright student/cultural exchange program.

The first official U.S.-Swiss consular relations were established in the late 1820s. Diplomatic relations were established in 1853. The U.S. ambassador to Switzerland also is accredited to the Principality of Liechtenstein.

Principal U.S. Officials
Ambassador--Pamela Willeford
Deputy Chief of Mission--Carol Urban
Political and Economic Counselor--Eric Sandberg
Commercial Officer--Julie Snyder
Consul General--Doria Rosen
Management Officer--Stephen Dodson
Regional Security Officer--Kerry Crocket
Public Affairs Officer--Daniel Wendell
Defense Attaché--Dorothea Cypher-Erickson
Drug Enforcement Agency--Joseph Reagan
Legal Attaché--Richard Tamplin